Macron flatters Xi Jinping because France is addicted to Chinese money

Emmanuel Macron’s trip to China earlier this month was not a triumph of diplomacy. While there, the Chinese military openly threatened Taiwan, but the French president tiptoed the issue, arguing that Europe should not take sides in the growing geopolitical conflict between the United States and China. ; that it should focus on its own strategic interests; and is expected to become a third major power alongside its two rivals.

Against the backdrop of three days of flattery from China’s increasingly autocratic President Xi, Macron has drawn a lot of criticism calm down in a country that has cracked down on dissent and clearly sided with Vladimir Putin in the war in Ukraine.

Of course, on one level, he is just a typical French president on the way out. De Gaulle, the French they tried to free themselves from American influence, even as the EU’s diminishing role in the global economy makes its claims to ‘superpower’ status increasingly comical. The biggest problem, however, is this. To an extraordinary extent, France is now completely dependent on China to keep itself afloat.

Take a look at some of the numbers. Luxury goods conglomerate LVMH has seen booming sales recently, with revenue up 17% overall, according to analysts’ estimates. Asia excluding Japan, i.e. essentially China, now it represents a third of its turnover and has overtaken the United States as its largest market.

Macron has drawn widespread criticism for being soft on a country that is cracking down on dissidents

Rival Hermes posted a 23% increase in sales, again easily beating market expectations, boosted by sales of its popular Birkin bags in the United States and China. L’Oréal is not doing so well, with slightly weaker sales in China in the last quarter, but its sales in the country rose another 5.5% in its latest results.

The trio of fashion and beauty giants now dominate the French stock market and economy to a point that few people have considered. Bernard Arnault’s fashion giant dominates the CAC-40 index in Paris in a way that makes Apple look like a minnow in the New York market. It is now worth 446 billion, which alone is around 20% of the total value of the CAC-40 index (together worth 2.35 trillion in case you were wondering).

If you add L’Oréal, which is worth 226 billion, and Hermès, which is worth 207 billion, the French fashion and luxury trio it represents nearly 40% of the total of the CAC-40. Over the past two decades, France has essentially become a fashion house with a connected country. No other major economy in the world is so critically dependent on such a small handful of companies, all concentrated in the same industry.

He passes himself off as a statesman and is increasingly a salesman for the French fashion industry.

For all the money poured into its airline, aircraft manufacturing, automakers, and defense and power conglomerates, nothing else in France really makes money or attracts investor interest. The luxury economy keeps the country and the stock market afloat, and the main and most lucrative market for all these high-end handbags and perfumes is now China.

Of course, there’s nothing wrong with that per se. Every country has industries they specialize in, whether it’s engineering in Germany or financial and professional services in the UK, and you need to find a way to sell them around the world to earn your life.

French fashion houses, and especially the most cunning ones Arnault, now the richest man in the world after overtaking Elon Musk, have been very successful in capitalizing on the country’s rich traditions in designer goods, making strategic acquisitions in Italy, Germany and elsewhere, and transforming once niche products into ambitious global brands. It’s a nifty trick if you can pull it off.

However, there are two big problems. The first is that there is no market more capricious than fashion, and the French economy is now exceptionally vulnerable to any change in taste. If any other kind of stocks were to take China by storm, it’s no exaggeration to say that the CAC-40 would crash. The second and most important problem is that the economy is completely dependent on access to the Chinese market, and this is granted at the whim of the government in Beijing.

We already knew that Germany was dependent on the Chinese market and that the country depended on it for its exports and to protect its huge investments in the automotive industry. But at least Germany has a diverse customer base and a large number of businesses. France is completely dependent on a handful of luxury brands.

It’s not hard to see why Macron is so interested in appeasing China.. The French president praises strategic autonomy, European sovereignty and the search for a third way between the two great powers of the 21st century. But there is a dirty secret behind all this lofty rhetoric. The French economy, even more than the German economy, is now linked to the Chinese market.

You need the country to keep growing and stay open to expensive imports, to fund one of the largest governments in the world and one of the most generous social security and pension systems in the world. Macron pretends to be a statesman. Yet increasingly he is just a salesman for the French fashion industry and an unreliable ally of the US, UK and everyone else.